– By Caroline Falls –
One of the most fundamental decisions a fleet or asset manager in any organisation will have to make is whether to buy or hire equipment that’s required to run operations.
“The lowest cost option available will normally be ownership for high utilisation items and hire for low-utilisation items,” according to Institute of Public Works Engineering Australasia’s (IPWEA) Plant and Vehicle Management Manual.
To make the best decision on whether to buy or hire an asset that is required for the first time or as a replacement the IPWEA manual sets out a series of questions the asset or fleet manager should answer.
Key issues to address in determining whether to buy would include: availability of hire equipment, how critical availability is, how a purchase will be funded, whether in-house operators and maintenance staff are sufficiently skilled for the particular equipment, and whether training is required.
Some of the considerations to be taken into account when looking at the option to hire include: a contractor’s capability to undertake the work, responsibility for mechanical failures and wear items (such as blades), and costs of managing the contract.
The manual drills down into these key areas for consideration. For example, to determine whether the item of plant is essential to the operations, the manual sets out a series of questions to address:
- What is the historical record of timesheet hours allocated against the existing owned or hired equipment?
- How many engine hours has the equipment clocked up?
- Is there any potential to increase utilisation? For example, can operator breaks be staggered to increase usage?
- What impact would there be on operations if the equipment was out of circulation for a long period?
- What is the annual cost of operating the item?
- Are in-house operators sufficiently skilled to ensure optimum productivity?
The manual also sets out questions an asset manager should answer to determine if there is a contractor available to provide the service and if so, whether the price and quality of service that would be provided is adequate.
An appendix comprises a sample performance assessment sheet designed to ascertain the competency of a hire plant contractor.
The IPWEA manual can be used in conjunction with the institute’s online tools for subscribers, such as a whole-of-life calculator. In trying to determine whether to hire or buy, this tool can assess the internal hire rates, and help compare tenders to ensure a best value decision is made.
The IPWEA manual is a how-to guide to setting up a fleet and asset management program. It covers topics such as rightsizing the fleet, minimising unscheduled repairs, returning the best value on a capital investment, deciding whether to buy or hire equipment, buying and disposing of equipment and embedding key performance indicators.
Fleet Auto News is running a series of articles based on the 280-page manual. This article is based on the third edition of Plant and Vehicle Management Manual, Institute of Public Works Engineering Australasia. For more information about the manual click here or telephone 1300 416 745.
